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q1formA - Name form A Econ 1 First midterm October 2007 We...

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Name form A Econ 1 First midterm October, 2007 We will award 5 points for doing the following correctly. FILL IN THE BUBBLES on your scantron for your name , your perm number , and the test form type . Use pencil only . All bubbles must be completely filled in. Each correct answer is worth 5 points. Answers left blank are worth 2 points. Wrong answers are worth 0 points. True-False Questions: Fill in Bubble A for True, Bubble B for False. 1. A competitive equilibrium price is defined to be a price at which buyers and sellers make equal profits. 2. Consumer’s surplus is the difference between the number of units of a good demanded and the number of units supplied. 3. Suppose that the supply curve for lettuce is vertical, the demand curve is downward-sloping, and the demand curve intersects the supply curve at a positive price. If the demand curve shifts up and the supply curve does not change, the equilibrium price of lettuce will rise and the equilibrium quantity of lettuce sold will not change. 4. The fact that fresh raspberries are both cheaper and more plentiful in the summer than in the winter is best explained by a shift in the demand curve. 5. If the demand curve slopes down and the supply curve slopes up, then when the demand curve shifts, the equilibrium price and quantity move in the same direction. 6. If the price elasticity of demand is E, then the price elasticity of supply is defined to be - 1 /E . 7. Suppose that the demand curve is downward-sloping and the supply curve is a horizontal line. If a sales tax of $10 per unit is collected from sellers for each unit they sell, the effect of the tax will be to increase the price by $10 per unit and to reduce the number of units sold.
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Econ 1 2 8. If the demand curve slopes downwards and the supply curve slopes upwards, the total reduc- tion in profits and consumers’ surplus caused by a sales tax of $20 per unit will exceed the amount of revenue collected by the tax.
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